eCPM vs RPM Is Skewing True Earnings
In most industries, the metrics that have been long established to measure success are generally tried and true reflections of the successful parties best interests. In the advertising and publishing industry, we truly can say that this is not the case. This becomes clear when you start hearing publishers, ad ops teams, and site owners debating and quoting eCPM vs. RPM as the key metric to determine a site’s earnings vs revenue success.
The flaw in this equation is thinking that eCPM or RPM is giving you a metric that is a “true north” for overall site earnings. The truth is that neither do. CPM, eCPM, and RPM could be going up but your site revenue, SEO, visitors, and UX metrics could all be tanking at the same time (in fact, we’ve seen it happen… a lot).
Below we’ll explain the math behind this and outline the simple formula that will allow you to consistently (and simply) measure the direction of site revenue/earnings; while taking into account things like visitors, SEO, bounce rate, pageviews per visit, and other UX metrics. Trust me, it’s simple and is a proven “true north” for publishers.
Why eCPM, CPM, and RPM Exist As Metrics
Before we dig into exactly how you can account for all of this — and we reveal the math and solution below — it’s probably good to provide some context. CPM, eCPM, and RPM are metrics that are well-accepted by the online advertising for good reason, and without understanding that you may not fully grasp why there is so much parody in the industry for using them.
CPM and eCPM are metrics for advertisers, not publishers. This isn’t hidden. It’s in the name; “cost per mille (thousand)”. It is outlining the cost for the advertiser to buy your ad inventory.
CPM vs. eCPM?
What’s the difference between CPM and eCPM? CPM is the cost per mille for an individual ad unit. eCPM — or effective CPM — is the total cost for all the ads on a page of a publisher’s website.
What’s the difference between earnings vs revenue for ads? Nothing but semantics really, they are both terms used to describe the monetization of ad inventory by publishers.
Now, you might be saying, “if they pay more for my inventory, aren’t I making more revenue (or earnings)”? The answer is simply, no. We’ve seen over and over again that ad eCPM and CPMs aren’t the best indicators of overall revenue improvement. Even RPM — which looks at revenue per thousand impressions — does not present a directionally accurate metric for publishers because it does not take into account earnings, visitors, SEO, and critical UX metrics that drive a site’s long-term success.
What’s a good eCPM or RPM? Look at EPMV Instead…
The questions of, “what’s a good eCPM, CPM, or RPM?” is actually the wrong question. As we outlined above, they do not take into account important things like an ads impact on SEO, UX metrics, or traffic. This means you could calculate eCPM, RPM, and CPM metrics that are going up but overall session earnings that are decreasing.
Let me walk you through the math above…
Let’s imagine you have a site with an $8 eCPM (or RPM both work the same in this scenario). You average 2.5 pageviews per visit right now and are making around $200.00 in a predetermined timeframe (nice work).
Now, let’s pretend an ad network comes along and offers you a guaranteed $10 eCPM. Obviously, $10 is more than $8, so you naturally accept. Come to find out, the ads that now play on your site include auto-play video, numerous ads above the fold, and other annoying elements that cause your users to bounce more often than they did before. This means your average pageviews per visit drop to 1.5. This means that overall you are making $50 LESS than you were in the same amount of time before ($150 vs $200).
Is this example always true, absolutely not. There are times that eCPM or RPM could be going up and revenue could also be going up. However, we see over and over again that this is not always the case.
Watch Video Explanation from the Google sponsored Publisher Forum
Measure EPMV instead of eCPM or RPM
With seasonality, the rise of mobile, AMP, and a million other variables, you need a metric that can help you ensure that you are always going in the right direction. This means that you account for revenue, visitors, bounce rate, and more all together.
The best metric for publishers is EPMV (earnings per thousand visitors or “session revenue”). The math behind this is very simple. Take your total site earnings for a period of time and divide it by 1,000 visitors (see image below).
EPMV will automatically take into account bounce rate and pagviews per visit. This is the only way to measure that revenue is truly going in the right direction in spite of any outside factors like seasonality.
Wrapping it all up
Smart publishers are aware of the fact that often they get high CPM’s or RPM’s (or offered guarantees by ad networks) that don’t always translate to higher site revenue. However, few are actually using EPMV as a metric to keep things on track.
I’ve been banging this drum a while. There are few in the ad space that are incentivized to join me; as looking at EPMV or session revenue really offers no benefit to them. However, it does offer a big benefit to publishers.
I encourage all publishers to use free advanced analytics on their site to dig down deeper into these things page by page (and landing page by landing page) to optimize their site and make smart objective decisions, or you could let machines make smart decisions for you.